The decision in brief
Creative finance has its own vocabulary, and much of it is shorthand that means different things to different people. This glossary defines the terms wholesalers and creative investors hear most, in plain English, and notes where a label hides a structure you should spell out on paper before anyone wires money.
View Transactional Funding →Why does the vocabulary matter?
Because lenders, title companies and attorneys work from documents, not slang. "It's a Morby deal" or "I need a gator" tells a closer very little. Every funding request goes faster when the structure is described plainly. Axelrad's creative finance page is a good starting point if you want to see how these structures are discussed.
The deal structure terms
| Term | Plain-English meaning |
|---|---|
| A–B | Your purchase from the original seller (A sells to B, you) |
| B–C | Your resale to the end buyer (B sells to C) |
| End buyer | The buyer who purchases from you, or takes your contract by assignment |
| Assignment | Transferring your rights under a purchase contract to another buyer for a fee |
| Assignment fee | What the end buyer pays you to take over your contract |
| Double close | Two separate closings, A–B then B–C, typically the same day |
| Simultaneous close | Often a synonym for double close; some use it for using C's money to fund A–B |
| Novation | Replacing your contract with a new agreement so the seller sells directly to the final buyer |
| Wholetail | Buying and reselling with light work, often to retail buyers, rather than a pure wholesale |
| Non-assignable contract | A contract or addendum that bans assignment without consent |
The funding terms
| Term | Plain-English meaning |
|---|---|
| Transactional funding | Short-term money for the A–B purchase, repaid from the B–C closing |
| EMD | Earnest money deposit, the good-faith deposit placed in escrow after signing |
| EMD funding | A lender puts up a refundable deposit for a fee |
| Gator / gator loan | Creative-finance term for someone who funds another investor's short-term need, usually the EMD |
| Gap funding | Short-term money for the shortfall between what closing needs and what other sources cover |
| Hard money | Asset-based loan for a purchase and often rehab, held for months |
| Bridge loan | Short-term loan that carries a property until a sale or longer-term loan |
| Takeout loan | The longer-term loan that pays off short-term money |
| Proof of funds (POF) | A letter or document showing money is available for a purchase |
| Points | A fee expressed as a percentage of the loan; 1 point is 1% |
| LTC | Loan-to-cost, the loan as a percentage of purchase plus rehab |
| DSCR | Debt service coverage ratio, rental income compared with debt payments |
The creative acquisition terms
| Term | Plain-English meaning |
|---|---|
| Subject-to | Buying while the seller's existing mortgage stays in place in their name |
| Due-on-sale clause | A loan term letting the lender call the loan if the property is transferred without consent |
| Seller financing | The seller acts as the lender for some or all of the price |
| Seller carry | The portion of the price the seller finances; often a second lien |
| Wrap mortgage | A new, larger seller note that wraps around the seller's existing loan |
| Arrears | Missed payments owed on an existing loan |
| Reinstatement | Bringing a delinquent loan current by paying the arrears and charges |
| Stack | Combining structures, such as subject-to on the first loan plus a seller carry |
| Morby method | A popular label for a stacked subject-to and seller-finance structure; describe the actual terms on paper |
How do these terms fit together on one deal?
Here is a numbered walk-through. Example only, using the figures Axelrad publishes on its transactional page.
- You sign an A–B contract at $200,000 and post $5,000 of EMD.
- You sign a B–C contract with your end buyer at $230,000.
- The contract bans assignment, so you plan a double close.
- Your transactional lender wires the $195,000 still owed after the deposit. At Axelrad, transactional funding covers 100% of the A–B price and starts at 1 point, so the fee here is $1,950.
- A–B closes, then B–C closes. Title repays the lender $196,950 from the end buyer's funds.
- After $5,500 in combined closing costs and the fee, you keep $22,550.
Swap in a seller-financed purchase and gap funding at step 4, and the vocabulary changes, but the questions are the same: what is owed, by whom, and how it is repaid.
Which terms cause the most confusion?
- "Gator." It describes a role, not a product. Ask exactly what is being funded and on what terms. Gator loan, gator funding and EMD funding are often used for the same thing; see Axelrad's EMD funding page for how it is offered.
- "Simultaneous close." Clarify whether the A–B leg is funded on its own.
- "Seller carry as cash." A seller carry is debt, not cash in escrow, as Axelrad's calculator glossary notes.
- Teacher-named methods. Names like the Morby method or the gator method are shorthand for structures. Write the structure down.
Key takeaways
- A–B is your purchase; B–C is your resale.
- Transactional funding, EMD funding and gap funding solve three different cash needs.
- Subject-to, seller financing and wraps are acquisition structures, each with its own risks.
- Labels like "gator" or "Morby" are shorthand; describe the actual terms on paper.
- Clear vocabulary makes lenders, title companies and attorneys faster.
Know the deal, not just the terms
When you can describe the structure plainly, send it to Axelrad and the team will tell you which funding fits, whether that is transactional funding, EMD funding or gap funding.
Frequently asked questions
What does A–B and B–C mean in wholesaling?
A–B is the purchase from the original seller to you, and B–C is your sale to the end buyer. In a double close, they are two separate closings, usually on the same day.
What is the difference between EMD funding and transactional funding?
EMD funding covers the deposit when you go under contract. Transactional funding covers the A–B purchase price at closing. One deal can use both, with separate reviews.
What does "gator" mean in real estate?
It is a creative-finance term for an investor or lender who funds another investor's short-term need for a fee, most often the earnest money deposit.
Is a seller carry the same as a down payment?
No. A seller carry is money you owe the seller, usually secured by a second lien. A down payment is cash you bring to closing.
What is the stack method?
It is a label for combining structures, typically taking the property subject to the existing first loan and having the seller carry a second note. The specific terms matter far more than the name.
Plan your next step
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